Early-Adopter vs. Late-Adopter

There are advantages and disadvantages to both first-mover and late-mover positions in the development of a new product. The first mover can "capture market share much more easily without having to worry about rivals trying to capture the same customers" and will already be familiar to the consumer and an established brand with operational distribution systems when rivals show up on the scene ("First-Mover Advantage," 2009). On the other hand, a late mover can gain an advantage even greater than the first-mover advantage. Whereas the first mover must take all the risk and spend the extra capital needed to develop a new product or technology, the late mover can step in after all the groundwork has been done at far less cost and risk. Thus, neither the first mover nor the late mover is guaranteed an advantage or a lack thereof; either position must be leveraged properly to provide an advantage.

Empirical data indicates that first movers "enjoy higher market share derived from substantial and enduring sales advantages" and Gal-Or (1985) identified an observable decrease in market share related to a firm's relative degree of "lateness of entry to the market" (Mellahi & Johnson, 2000, p. 445). Lieberman and Montgomery (1988) saw first-mover advantage as an "environmental change" that "sets up an initial asymmetry that...enables [the pioneering firm] to reap abnormal profits derived from the firm's competitive head start over rivals" (Mellahi & Johnson, 2000, p

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t to VHS ("First-Mover Advantage," 2009). Although it is true that a first mover can gain an advantage in some cases that rivals can never overcome, it is also true that late movers can gain the advantage more often than one might think. Wong (2003, p. 22) points out that a first-mover can encounter failures or make mistakes that cause it to become "unviable," and "The uncertainties of a new market can apply to both technology as well as unformed consumer preferences." In addition, when the product is brand new, "preferences for attributes are 'weakly formed,'" with both its producers and its users not yet sure what its best uses and advantages are (Wong, 2003, p. 22). Moreover, if the first mover fails to capture the market in its initial move, a late mover can gain the advantage because it can leverage emerging information on what consumers want in the product and can do a better job of serving them than the first mover did (Wong, 2003, p. 22). Late movers can also generally keep more of their resources than first movers can, since first movers need to invest their resources heavily to develop a product from scratch, while late movers can wait until the new product and any related technology have already been develo

Category: Economics - E